ANZ $2.8b profit sparks buyback plan

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Australia and New Zealand banking Group reported a net profit of
$2.815 billion for the 12 months to September 30, 2004, up 20 per
cent from the same period a year earlier.

ANZ said it expected cash earnings per share growth of around
seven to eight per cent in the 2005 financial year.

ANZ added that it had extended the contract of chief executive
John Macfarlane until 2007.

The bank today also unveiled plans to buyback at least $350
million in shares on market and had signed a memorandum of
understanding to shift the majority of its Project Finance business
to Standard Chartered.

ANZ said that it would be placing a greater emphasis on revenue
growth going forward, adding that its cost-to-income ratio was
expected to decline at a more moderate rate from recent years.

The bank said the external environment will be favourable and
there will be good underlying performance from its businesses.

Still, the bank flagged that some one-off items could impact the
2004/05 earnings and that this means that cash earnings per share
growth should be consistent with a seven to per cent rate.

"A number of one-off factors in the year will however impact
earnings, which on balance will have a negative impact," Mr
Macfarlane said.

"These include the loss of earnings arising from the sale of
London-headquartered project finance activities, reduced earnings
from Panin Bank and Group Treasury, more subdued investment
earnings at ING Australia, and measures in New Zealand to arrest
customer attrition in ANZ's retail arm, together with the roll-off
of historical tax structured transactions.

"For 2005, we have adopted an internal stretch target of eight
per cent cash earnings per share, however taking into account these
one-off factors, a guidance level of seven per cent cash earnings
per share would be more realistic."

ANZ added that the share buyback comes as the company's adjusted
common equity ratio rose to 5.1 per cent, above its target range.
As well, the bank has planned a sale of $US1.5 billion in
international project finance assets, which will also increase its
capital position, hence the buyback.

The sale of the project finance operations means the company has
nearly completed its shift away from non-core operations.

"The sale of our international Project Finance business largely
completes the withdrawal from non-core activities that previously
included the sale of Grindlays and the refocusing of our Asian
business around our core strengths," Mr Macfarlane said.

ANZ said that despite competition, underlying asset growth was
particularly strong with better-than-expected results in consumer
finance and personal bank distribution and bank products, which
benefitted from the rising interest rate environment.

The bank did say that international was subdued, which reflect
an overall softer market but that there was a positive outlook for
the division.

The Corporate division had earnings rise 11 per cent on the year
due to strong lending and deposit growth while Esanda performed
well and ING Australia continued to show improvement.

ANZ said the financial performance in New Zealand was
"acceptable" due to competition and the uncertainties surrounding a
major acquisition.

"With respect to New Zealand, ANZ recently decided to reduce the
scope of integration and to accelerate its completion," Mr
Macfarlane said.

"ANZ now expects to complete the formal integration by the end
of calendar 2005."

The bank said it is no longer integrating the retail banking
platforms as the pay back is not compelling.

As a result, the bank said that the total cost on integration is
expected to be about $NZ220 million, with net synergies of $NZ76
million, compared to initial estimates of costs of $NZ265 million
and net synergies of $NZ69 million.

"As anticipated, we have experienced some revenue attrition with
the consequent loss of market share, particularly in Institutional,
as large customers rebalance their lines with the merged entity,
and where substantial price competition has taken place," Mr
Macfarlane said.

"Notwithstanding this, the overall level of revenue attrition is
less than half of that anticipated at the time of acquisition."

The bank reported a fully franked final dividend of 54 cents, up
from 51 cents in the same period a year earlier. This lifted total
dividends for the year to 101 cents, up from 95 cents in the
previous year.

At the same time the bank said it had resigned its chief
executive until September 30, 2007, which is a one-year extension
on his current contract.

The final year will pay fixed remuneration of $2 million and
variable remuneration of $2 million along with other long term
incentives with a value of $2.5 million.